Finding The Right 1031 Exchange Options
There are several 1031 exchange options that one can explore when looking for a 1031 exchange property. These options are the 1031 exchange, the Tenets in common investment, the triple net leases, and REITs. These options give an investor room to make the best investment for him or her. Most of these investment opptunities can be handled by the same qualified intermediary and therefore can be easily handled with all of the 1031 exchange options laws followed.
The strait 1031 exchange options are exchanges where one or more property is exchanged for one or more properties of equal or greater value. In order for it to be a true 1031 exchange, the properties have to be of like-kind and of like value, although an increase of value can and is often done. These exchanges are often handled by qualified intermediaries and have several very complex laws that need to be followed to avoid the IRS involvement. If the 1031 exchange options are done correctly, the taxes from the purchase and sales of property is deferred until a later date, allowing one to use the money from a sale to make a purchase.
The Tenets in Common 1031 exchange options is where the real estate is owned by more than one owner, otherwise known as co-owned real estate or CORE. This means that there is more than one owner on the title and an equal ownership is employed. There are rules that govern the management of such property and with the right intermediary company, these rules can and will be fully explained and the right property that with the right onsite property management in place. All decisions regarding the Tenets in Common property must be handled by a vote, and no single person has more power than the others.
The triple net leases or NNN's of the tenets in common 1031 exchange options is where the building is owned by one person, and rented by another. All insurances, taxes and maintenance fees are handled by the tenet the rent itself if typically lower. This is often known as the "come hell or high water" lease because of the complexity of it and the investment of the lease itself.
REITs, or Real Estate Investment Trusts are another of the popular 1031exchange options. These companies that one can invest in under the 1031 exchange options law own or manage real estate properties and investment properties. Some of the REIT companies even offer mortgages and other investment opportunities. In order for these companies to qualify as a REIT, 90% or more of the profits must be distributed among the shareholders.
Any number of these 1031 exchange options can be very profitable when handled correctly. To ensure proper handling and taxation if necessary, employing a specialist in the field and an intermediary is prudent advice. All of these methods of 1031 exchange are very complex and none should be handled without the proper personnel to ensure the proper methods are handled. While professionals can be expensive, the costs of an IRS audit are much higher.
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